Payment Terms
Conditions specifying when and how payment is due.
Payment terms define the timeframe, method, and conditions of payment between buyer and seller. They include the due date (Net 15, Net 30, etc.), accepted payment methods, early payment discounts, late fee policies, and deposit requirements. Payment terms should be established before work begins, documented in contracts, and printed on every invoice.
Example
A marketing agency's payment terms require 50% deposit before work begins, with the remaining 50% due Net 15 upon delivery, payable via ACH or credit card.
Why It Matters for Your Business
Clear payment terms set expectations upfront, reduce disputes, and give you legal standing to enforce collection and charge late fees.
Practical Tips
- •Standardize payment terms across clients rather than negotiating individually each time.
- •Require deposits for large projects to share the cash flow burden with clients.
Related Terms
More Invoicing Terms
AR Aging
A report categorizing outstanding invoices by age.
Billing Cycle
The recurring period between billing statements.
Credit Memo
A document reducing the amount owed by a customer.
Days Sales Outstanding
Average days to collect payment after a sale.
Invoice
A document requesting payment for goods or services.
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